Moves to ease entry to the pharmacy sector were "very unfortunate", the German group which dominates the business in the Republic said yesterday.

Gehe, which last month spent €152 million (£120 million) on the purchase of a chain of 29 Irish chemists, said the Government's decision to rescind trading restrictions would "substantially reduce" prices in the market.

This view contrasted with the Irish Pharmaceutical Union, whose president, Ms Marie Hogan, said in a statement: "These changes will have a minimal impact on prices." Ms Hogan claimed the decision was "high-handed" and "may well put the lives of patients at risk".

The development was welcomed by the Competition Authority, which produced a report this week on Gehe's acquisition of the Unicare chain. That report is believed to have recommended approval of the deal, which was concluded before the Government moved on Thursday to open the sector to competition.

The managing director of Gehe's retail pharmacy division, Mr Michael Ward, said the 1996 regulation abolished by the Government "offered a degree of security to pharmacists".

Asked whether the decision would diminish the value of the acquisition, Mr Ward said: "It's a very hypothetical argument, isn't it?" He added that the group operated in many markets in Europe, which had similar arrangements.

"When we buy we look at long-term cash flows," he said. As long as those flows were robust, Mr Ward said he would be happy with the deal.

The Government's decision followed advice from the Attorney General, Mr Michael McDowell SC, who said the 1996 Regulation was ultra vires. The decision contradicted the view of the Minister of State for Health, Dr Tom Moffat. In an address to the Irish Pharamceutical Union last November, he said: "I remain convinced of the merits of providing for controls in this area, for the same reasons that the regulations were introduced in the first instance."